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Donchian Channel and other breakout methods

  • #41
  • Aug 4, 2009 9:43am Aug 4, 2009 9:43am
Asia break out trade results:

Attached File(s)
File Type: xls G trade rules and test results 0904.xls   18 KB | 1,384 downloads
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  • #42
  • Aug 4, 2009 9:53am Aug 4, 2009 9:53am
some good break out resources?:

http://www.forexfactory.com/t/4549/t...shenker-1.html
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  • #43
  • Aug 12, 2009 1:14am Aug 12, 2009 1:14am
Quoting smikester
some good break out resources?:

http://www.forexfactory.com/t/4549/t...shenker-1.html
Hmm. Not really, Smikester. But here is a situation to trade out of. ATR(200) is at 36 and the Donchian channel range is 74.

That's a compression ration of 2:1 ! 2 : 1 !!!

For those of you that couldn't be bothered to read the rest of my thread, anything less than 3 : 1 is worth a punt. Waiting for the FOMC statement later today. If this doesn't burst out spectacularly then I'll eat this post. And that mouldy link.

Here's a chart:

Attached Image (click to enlarge)
Click to Enlarge Name: gbpusd090812.gif Size: 31 KB
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  • #44
  • Aug 26, 2009 10:20am Aug 26, 2009 10:20am
I am still monitoring this strategy but a glance back will show that there was not a reliable break out from the above scenario.
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  • #45
  • Nov 18, 2010 4:26am Nov 18, 2010 4:26am
Smikester,

Thanks for sharing some great information in this thread about Donchian Channel Breakouts. Do you still use this strategy. Also, does anyone know of a Donchian Channel indicator for Metatrader.

Cheers.
  • #46
  • Dec 2, 2010 6:25am Dec 2, 2010 6:25am
Quoting smikester
Yes I think it's good for what it does. Works on any pair with a reasonable spread and gets us out of the doldrums.

I tend to sit out the odd false break out until something happens or price action tells me. I'd be interested to know if closing everything on the next bar would be cheaper in the long run. I suppose a computer could do that?
Hi,

I am am also a fan of Channel Breakout or Donchian Channel breakout.
I uses entry on breakout of 55 days or 20 days and stop loss at 20 days opposite direction price channel opposite direction. However that means I will be out of a trade most of the time. Many times I was caught dearly on side way market and incorrectly enter on false breakout.

The worst thing about this method is the stop loss (20 days channel) is too wide.

Most of the losses are due to eager to enter trade on sideway market.

I would like to know the following based on your past trading back test:

1. Have you resolve the the common problem of ability to stay away from false breakout with this method?

2. Does Donchian channel breakout work on smaller time frame of 1min and 5 mins?

3. How you uses the ATR to confirm the channel breakout?

When I see a long bar breakout, I will stop loss at the breakout bar opposite end high or low depending long or short. However, for less than a day breakout, this method will not work unless we have very nice steep trend.


Thanks.

Cheers!
  • #47
  • Dec 9, 2010 4:46am Dec 9, 2010 4:46am
1. No. But the balance of probabilities lets us trade in the direction of the overall trend. A compression is often an inside bar on a higher time frame. If it isn't it has similar properties.

2. I rarely look at lower than H1 with this strategy, so I have no experience. I don't see any reason why not. But spreads are a problem with lower time frames.

3. I am interested in channels which are <(ATR(14)*3) or <(ATR(200)*3). I'm still learning about the relationship between the two ATR's. The technicalities of this strategy can get very complicated if you let them. Basically I'm looking for a break out which will run for several hours or days. They are the ones which pay for the effort.

4. Thanks for your interest and sorry for taking so long to reply. Sometimes I don't subscribe to my own threads!
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  • #48
  • Dec 9, 2010 4:54am Dec 9, 2010 4:54am
Quoting fxpilot
Smikester,

Thanks for sharing some great information in this thread about Donchian Channel Breakouts. Do you still use this strategy. Also, does anyone know of a Donchian Channel indicator for Metatrader.

Cheers.
Sorry for the delay. Yes I do. Here are some interesting indicators:

Attached File(s)
File Type: ex4 Chin Breakout Alert V.1.2s(m MTF).ex4   14 KB | 1,452 downloads


Attached File(s)
File Type: mq4 Chin Breakout Alert V.1.2s(m MTF).mq4   25 KB | 1,863 downloads


Attached File(s)
File Type: ex4 Donchian Channels - Generalized version.ex4   3 KB | 1,658 downloads


Attached File(s)
File Type: mq4 Donchian Channels - Generalized version.mq4   3 KB | 2,325 downloads


Attached File(s)
File Type: ex4 DonchianChannel-mql-file_AngThFiboLv.ex4   6 KB | 1,431 downloads


Attached File(s)
File Type: mq4 DonchianChannel-mql-file_AngThFiboLv.mq4   4 KB | 2,031 downloads
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  • #49
  • Dec 9, 2010 7:14am Dec 9, 2010 7:14am
Quoting jerryyap
Hi,

I would like to know the following based on your past trading back test:

1. Have you resolve the the common problem of ability to stay away from false breakout with this method?

Thanks.

Cheers!
The answer to this is as my previous post, but I should elaborate. There is not a signal or type of behaviour of the channel which prevents false breakouts that I have found.

However, you may be familiar with the various methods of entry which prevent entry, loss, or substantial loss with break out trades. Most are based on measuring some sort of pull back and miss some good moves but well worth implementing.

The type of break out I wish for is where we have a long Donchian level which is then broken by a fairly solid break out bar and only by about 5 - 10% of the channel. Well worth trading straight off, in my opinion.
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  • #50
  • Aug 2, 2011 11:44pm Aug 2, 2011 11:44pm
Quoting pipmutt
Moving averages, really, you make money with that stuff?

I don't know anything about Donchian Channels but wouldn't you do just as well with some simple trendlines on that chart?
You cannot backtest trendlines, unless you can mathematically define them.

And unless you can objectively define and test the trading rules of your system on 10 to 15 years of data, you cannot know if it is a winning system.
  • #51
  • Nov 7, 2011 1:54pm Nov 7, 2011 1:54pm
hi do you template and indicator please? than!
  • #52
  • Nov 8, 2011 2:09am Nov 8, 2011 2:09am
See previous page for indicators. That's all I have. I'd be interested in an alert which compares the channel height to the ATR if you come across one.
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  • #53
  • Feb 7, 2015 3:44am Feb 7, 2015 3:44am
Quoting smikester
Bollinger Bands are similar to Donchian channels but they are weird and curly and I'm not sure how they work. But something Bollinger Bands do is compress when the price is consolidating and signal a break out trade in the offing. (is it nearly news time yet?) I discovered that Donchian Channels do the same thing but, in my humble opinion, better. So here's a chart with some more indicators on it. To please pipmutt:
I have been searching for both Donchian and Bollinger Bands methods - this is the first post that I have ever read where they are both mentioned

I am looking at exactly this plus reading candlesticks of course

See attached chart, after the initial entry sell signal at red box, there are never any sets of 4 weeks that give buy signal -

However, we might be close this coming week

Obviously, I wouldn't be trading weekly charts, it is a 20 day breakout, so watching daily candlesticks would give opportunity

Also, there is a Double Bollinger trading method that gave signal as marked on the chart, you can read more about it here:

http://www.fxkeys.com/double-bolling...o-trade-forex/

But here are the rules for short entry now -

Short Trade Setups:

To go short (to sell), you have to wait for one of the candlesticks to close below the BB1 lower band.

Then you should check the previous two candlesticks to see whether their close prices are above the BB1 lower band or not.

If so, you have a short trade setup (sell signal), and you can go short (sell) at close of the candlestick which has broken below the BB1 lower band.

Anyone reading this, if you know of any threads currently discussing Donchian, Bollinger Bands or Daily Candlesticks, I would appreciate a heads up

If not, I may post setups here for now, thanks, John
Attached Image (click to enlarge)
Click to Enlarge Name: 7-02-2015 7-28-27 PM.png Size: 287 KB
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  • #54
  • Feb 7, 2015 5:04am Feb 7, 2015 5:04am
Nice methodology Erebus :-)

I employ a similar breakout technique using the Standard Deviation Channel as an alternative indicator to the Bollinger Band. The adaption has followed on from looking at alternative approaches to the traditional Turtles donchian breakout methodology. It was after reading Curtis Faith's book where he began exploring a number of variations to the traditional model having extensively back-tested a number of these variants, which made me also consider looking at variations to the traditional breakout approach the Turtles employed. Given my strong atachment to the Bollinger Band breakout, it was a small variation that made me start looking at the standard deviation channel in concert with the donchian breakout. The adapted technique has certainly performed well over the past 2 years and I am further developing the approach to look at ways to supercharge it.

Unfortunately however I use standard bar charts as opposed to candkesticks so it may not be your cuppa tea but despite this, I smell the similarities between these approaches. The method I utilise is described here.
  • #55
  • Feb 10, 2015 5:29am Feb 10, 2015 5:29am
Quoting Erebus
{quote} I have been searching for both Donchian and Bollinger Bands methods - this is the first post that I have ever read where they are both mentioned I am looking at exactly this plus reading candlesticks of course thanks, John {image}
Thanks for the kind words. I still do not use Bollinger Bands in any of my strategies but I do like the compression signal when a Bollinger Band reduces within a Donchian Channel. I've said it somewhere before but it is the distillation of the inside bar strategy, triangular break out strategy, "Stairsteps" strategy and what have you. The trick being to trade with the main trend and make a few pips with low risk.

I have been consistently profitable with a few methods and I have not shared them in any formal way on these threads because I don't need the pressure. I'm "on my way" and it looks like being a much slower process than I originally envisaged when I started out. So, to start an ego driven thread in Trading Systems forum and fill a bunch of learners with hope is not my priority. Still, one of these methods has been to trade Donchian channels on the lower time frames and if you would be interested I will give you more details of the rules I use. It's a work in progress and I am interested in what you have posted above and I will look at those methods when I have the time. I have no reason to believe my methods are any more efficient but I have learned a lot over the years and I know it is worth researching ideas.

2012 and 2013 were not kind to trend traders and out of interest I did some work and I was surprised to find that trend following was not necessarily as profitable as it looked, even in a fairly strong trend, with an expectation of about 10 pips a day if you're lucky. With margin tied up and risky trades to add joining the trend, the reward didn't make sense to me. Anyway I'll let you know what I have found.
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  • #56
  • Edited 3:43am Feb 11, 2015 3:29am | Edited 3:43am
So, here's "the juice": One of my methods using Donchian channels takes the 5 minute chart and trades only in the direction of the 20dma. That is a daily simple moving average. If the price is above, then only longs. The price then must be above the daily open. i.e. London midnight. After 9 am London, set a buy stop above a Donchian channel flat line which is over 10 units (of 5 minutes) long. This will be the day high, so far and should only be done when the range since midnight is less than half the daily atr(24).

It is basically a volatility break out system using London hours, which are the best. Eur/Usd, Eur/Gbp and Usd/Chf are best. There are lots of other little rules, of course. A high proportion will go to 3 : 1 R : R so you have to know how to trade - not trading into obvious resistance, news, big round numbers and so on. The tighter the range before 9am London, the better the break out. It is similar to the 1, 2, 3 system. Sometimes, you can get topped, tailed and then filleted.
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  • #57
  • Feb 11, 2015 11:00pm Feb 11, 2015 11:00pm
Quoting smikester
So, here's "the juice": One of my methods using Donchian channels takes the 5 minute chart and trades only in the direction of the 20dma. That is a daily simple moving average. If the price is above, then only longs. The price then must be above the daily open. i.e. London midnight. After 9 am London, set a buy stop above a Donchian channel flat line which is over 10 units (of 5 minutes) long. This will be the day high, so far and should only be done when the range since midnight is less than half the daily atr(24). It is basically a volatility...
That's awesome, thanks for sharing. I have thrown a chart together with what I think you mean, any comments welcome.

Just wondering why 5 minutes and not 15? More opportunity I guess, quicker reaction to the days price flow.

Last fews days have been very low volatility most pairs, maybe some action today for me to study the entries.

Can easily watch 3 pairs with just one chart, once established price is under / over the 20 SMA and the daily open also

I have a very simple EA which I can set for number of pips for stop loss and take profit; it does that for market orders very quickly, so no messing around figuring out the 3:1 numbers.

I also have an ADR indicator which is dynamic, it plots the projected low or high of the day form the current high or low thus far, can be very accurate, and makes it easy to tell if there is room for the trade to complete.

See what you think, John
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 12-02-2015 2-46-01 PM.png Size: 60 KB
Click to Enlarge Name: 12-02-2015 2-41-40 PM.png Size: 67 KB
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  • #58
  • Feb 12, 2015 1:33am Feb 12, 2015 1:33am
Quoting Erebus
{quote} That's awesome, thanks for sharing. I have thrown a chart together with what I think you mean, any comments welcome. Just wondering why 5 minutes and not 15? More opportunity I guess, quicker reaction to the days price flow. Last fews days have been very low volatility most pairs, maybe some action today for me to study the entries. Can easily watch 3 pairs with just one chart, once established price is under / over the 20 SMA and the daily open also I have a very simple EA which I can set for number of pips for stop loss and take profit;...
I don't think it would work very well with Aud/Jpy because of liquidity. We are looking at London 9am so we would be trading the three pairs I mentioned,,, Anyway, whatever you do read every word of my post and forward test on a demo, for at least 3 months.
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  • #59
  • Feb 12, 2015 1:36am Feb 12, 2015 1:36am
Quoting smikester
{quote} I don't think it would work very well with Aud/Jpy because of liquidity. We are looking at London 9am so we would be trading the three pairs I mentioned,,, Anyway, whatever you do read every word of my post and forward test on a demo, for at least 3 months.
For sure, have to trade the pairs you mentioned, this was just for chart set up, I'll observe today or test with some 0.01 lots, thanks again

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  • #60
  • Feb 12, 2015 1:42am Feb 12, 2015 1:42am
For the Donchian Channel, what are your calculations for the Donchian Channel? Given that you are talking a 1hr Time Frame. Are you saying 19 closes enough for a 1hr Chart?
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